Posted
by
timothy
on Thursday September 04, 2014 @09:07AM
from the level-boss dept.

cartechboy (2660665) writes [Elon] Musk and Tesla's biggest hurdle in the U.S. has been bypassing conventional dealerships and selling directly to customers. This concept is something that's illegal in many states thanks to a nationwide patchwork of decades-old franchise laws. Tesla's latest battle is taking place in Georgia where dealers allege that the start-up company is in violation of the state's franchise laws. Not surprisingly, Tesla's fighting back. To sell cars in Georgia, Tesla had to agree to sell fewer than 150 vehicles directly to consumers in the state. Last week the Georgia Automobile Dealers Association complained that Tesla sold 173 vehicles. Tesla hasn't publicly commented on how many vehicles it has sold in Georgia. We've seen time and time again how this story ends, and the writing is clearly on the wall for this case.
Another bit of writing on the wall, though, as reported by the L.A. Times, is that recent electric car sales in the U.S. have been stagnant.

I imagine a lot fewer than that - or the number has to get a LOT higher.

After you sprinkle a half a dozen in California, it's about one per state in its largest metro area, and a few with one in their neighbors only. Texas, no doubt, could use a few, but the one large geographical states are pretty much centered on their largest cities. Las Vegas metro services 2 of their 2.7 million people, with only Reno left out of a showroom. Phoenix Metro does the same thing at a similar percentage, and while Tucson

Simple solution: they can see them in the showroom, and buy them online..

This is already Tesla's model. You can't buy a car at the showroom; only online. Each showroom has at least one Mac you can use however you want, and an employee will help you if you have any questions. But you can't pay there.

"Special interests" is an obnoxious phrase purposely constructed to conflate issue groups that are mostly grassroots(on "both sides") with big money market manipulators who like having a senator in their pocket when they need one to make more money.

I'm not saying I like the influence of those issue organization, just that they're not greedy rent seekers actively harming others for their own benefit like the latter group.

Originally they were not bad laws, back when there was only 1 or 2 car manufacturers who did not really have to compete, and when there were not many mechanic shops. Now the laws are really just a way to pay middlemen who pay lawmakers.

It is a bit more subtle than that. Back in the 20s there were over a dozen auto manufactures and many repair shops, so that was not an issue. The issue was one of unbalanced power. The manufactures could bully the franchisors by forcing them to buy more cars than they could sell, yank their franchise after they had built up the brand and sell it somebody else, drive up franchise fees after the initial 10 year contract was over.etc.

A free market only works when there is a free exchange between 2 parties. The laws were supposed to, and did, redress this balance of power. Of course, what was true 100 years – or even 25 years does not necessarily apply today or to Tesla. The NADA today is about defending locally entrenched business interests and the status quo.

A whole bunch of dealers did get fucked over a few years ago...when the automakers went bankrupt, and as part of the process revoked a bunch of dealership licenses. It amounted to: the cars you have, you still owe us full price for, you have 30 or 60 days to sell them before you can no longer sell them as new 'brand' cars. Good luck with that.

I would take the opposite view. GM had a large number of inflexible costs. Old underutilized factories that they could not close, redundant union employees that could not fire, and a huge number of small unprofitable dealerships. The state franchise laws were so strong that the only way to fire these unprofitable customers was to dealer bankruptcy.GM and Toyota have roughly the same market share but GM had twice as many dealers. In the 60s GM had over 50% of the market share, so it made sense to have 7 bran

Originally they were not bad laws, back when there was only 1 or 2 car manufacturers who did not really have to compete, and when there were not many mechanic shops. Now the laws are really just a way to pay middlemen who pay lawmakers.

I think that is probably backwards. These laws would obviously tend to help larger car companies exclude competition. Like many issues of regulatory capture I would deduce that these state franchise laws were actually bought and paid for by big companies like GM, Ford and Chrysler in order to ensure that all those smaller car companies that didn't have robust dealership networks would either be forced out of business or forced to sell out to the big three. It took some serious capital investment and many years to set up dealer networks for Toyota, Honda and other foreign car companies. But they had the backing of their respective countries and large consumer base at home to leverage. Make no mistake these laws may have been passed at the behest of the local dealers, but those dealers were working from the same game plan as the big three.

If you only read the laws themselves, you wouldn't think that. In theory, the laws are there to give you better service through a dealership because the evil large corporation gives you poor service at a steep price. They're there to prevent a monopoly on service so that you're not required to go to a Ford Garage so that a Ford Mechanic can fix your car with Ford Parts and price gouge the hell out of you.

In practice, they still do it and with the kickbacks and other ties to the parent company, they might as well be the same thing. The dealer ends up being the middle man that takes his cut and raises the price by thousands of dollars. The laws have effectively enshrined the dealership business model and Tesla threatens that.

Car franchise laws were put in place to protect dealerships. Car manufacturers did not want to put in the heavy local investment to sell cars in every area, and dealerships did not want a manufacturer swooping in to steal the business with lower prices once the areas started booming.

Car franchise laws were put in place to protect dealerships. Car manufacturers did not want to put in the heavy local investment to sell cars in every area, and dealerships did not want a manufacturer swooping in to steal the business with lower prices once the areas started booming.

Franchise laws were not needed to achieve these goals. A far simpler solution would have been a contract between the manufacturer and the dealer, establishing the terms of the relationship.

First, it assumes that the two parties have relatively equal power, or at the very least that one can't bully the other. Second, it assumes the situation is static. This is rarely true after 10 years. After 20 years, normally the situation has changed so much that one party dominates and can squeeze the other party dry.

Maybe not. But even if franchise regulations are needed (I am not convinced) it would make much more sense for them to say "If you are going to use franchises, you must do it this way" rather than to say "You must use franchises".

What dealership? Tesla is not trying to court dealers and instead wants to sell direct. They wish to, as you put it, put in the heavy local investment and have no dealers that they could swoop in and steal business from.

Amazing that so many of the states that believe in the free market and keeping Guvmint out of people's lives, feels the need to ban dealerships of a competing vehicle. I want to buy a Tesla. If I want to buy one in my own state, and cannot, well what kind of free market is that?

This tells me two things.

1. They are hypocrites.

2. They are losing this battle.

If no one wanted to buy Teslas, there would be no reason to try to ban sales of them in your state.

In my state, if you sell more than 5-8 cars a year, you have to get a dealers' license. Doesn't matter if they're old, new, salvage, etc, you hit that number, you'd better have a license from the state to sell cars.

Do I agree with the law? No, I think it violates the concept of free enterprise.

Is it the law? Yes, and in that every single person, corporate or otherwise, is required to follow it.

Assuming TFS is accurate (a dangerous assumption to make, I know), it sounds like the situation is thus:

Well, OK, but technically that makes everyone the victim, not just Tesla.

That does not mean they don't have to comply. They should prove that they did not sell more than 150 cars.

Agreed; and if it turns out that Tesla was in violation of the law, Musk should consider shutting his mouth for once. After paying the fines and apologizing, that is. Otherwise, I'd say GADA should be the folks eating crow.

In other words, they're stagnant because only the fanatics have bought them, and the rest of us don't want them unless they're at least as convenient and cheap as a gasoline car.

I get about 30mpg around town, fill up with gas about once a month if I'm just doing town driving, have to drive at 40 below zero for two or three weeks a year, and make half a dozen five hundred mile highway trips every year. I have precisely zero reason to buy an electric car with current limitations and prices.

No, that's not what I am saying.With every technology, there is an early adopter, then a dip, then an increase. There are a number of reason for that. everything from cost or social perception or people just haven't thought about why it's good.

So your argument is current technology wont work for you therefore no one will get one?

Franchise law are there for a very good reason. Citizen were abused, cheated, and lied to pretty systemically. Fraud was rampant. That's why we ended up getting them in the first p

One of the other articles on the L.A. times is reporting that "U.S. auto sales surge in August to month's highest level in years [latimes.com]" so - it's lies, damn lies and statistics time. Electric car sales fell 0.1% as a proportion of total car sales during a period that included the car sales at the "highest level in years."

Consider also that Tesla is still on back-order status and they are gearing up to release two new models of cars. Other than the Tesla, only Nissan has a pure electric generally available on the market - the Leaf - which sold over 120,000 cars last year. See, Wikipedia [wikipedia.org]. Ford's focus is also out there, but only in select markets.

Shorter: there's only one mass-market electric car on the market. The Tesla Model S, while definitely a beautiful car, doesn't have the production volume to compete in a market share battle - that's not Tesla's bag - yet. The "stagnation" story is more of the knee-jerk car guy rejection of electrics that has been bouncing around in the media for 30 years now.

Market share is stagnant, according to that description. Of course, the cost of Tesla limits it market to start with, even if they significantly increased sales it would not impact total EV market share that much. It does not take a huge number of sales for the upper end EV market to become saturated. Significant overall market share improvement can only be achieved with more products in the lower cost brackets, and that is where the total lifetime cost & functionality comparisons against gas cars becom

In other words, electric car sales are stagnant because of a supply problem, not a demand one. They can't produce more cars and they essentially are sold out months in advance.

As a proud owner of a Tesla (6 months and 15K miles so far), I can't imagine buying a non-electric car in the future. I live on the east coast and the supercharger network is built out around me well enough that I don't have any range anxiety at all.

Several friends are looking to see how I do this winter before putting money down themselves. A couple others already put down a ridiculous amount to be on the list to buy a Tesla Model X when it finally hits production.

Dealers should be concerned. If the big auto manufacturers go the Tesla way, dealers won't be making much in service contracts in the future.

I agree with you. I'm also the owner of a Tesla (18 months, 19K miles). Tesla is constrained by batteries. They can't make them fast enough. There's also a huge demand for the model X with thousands of pre-orders yet it is sight unseen. This is from a company that does no advertizing other than their showrooms.

Or maybe electric cars are only for famines earning over 150k annually. No one else can afford to buy a car that is only useful some of the time.

I know one couple with a nissan leaf and a standard SUV. The leaf is use for around town driving and to get one of them to from work. The sub is for the husband and distance driving. 50-60 miles a day doesn't take you far.

Well, when we are dealing with needing sales in the hundreds, or at least tens of thousands to make a big difference in market share, a few hundred sales more or less in the narrow Tesla market would not be very relevant.

Yep. It is an availability bias. We only hear about states rights when in completely screws something up. You can't seriously say that a uniform code of law works best across the country, can you? What is best for California is best for New York? Or what is best for Arkansaw is best for New Jersey? Or what is best for Hawaii is best for Montana? Different attitudes, different resources, different population densitities. We are strong because we are different but united, granted when we screw it up t

That's not states rights. State's rights is the argument that the State's have the right to nullify federal law. You're talking about limit principles on federal power - different part of the constitution.

The reason they're stagnant is because there is only one brand worth buying them from is Tesla.

Toyota/Honda has a decent lineup in the upper range with their plugin hybrids but if I'm going to plunk down 50k, it might as well be a Tesla or I can get a gas powered car with identical economy for half that price from better brands.

Perhaps one of the Germans will start entering the market with a better option but the Chevy Volt is crap, Ford and Fiat publicly state they rather don't do it, Fisker was legislated out of business, the rest of them are simply putting in a model because they have to and it shows; it's the same frame as a gas powered car with some batteries slapped into it.

The leaf is a reasonable attempt I the no, pricey for what it is, but seems an honest attempt.

The problem is they're two different market segments. The Leaf is an honest attempt to build an electric car. It gets you from A to B, looks kinda cute, and RUNS ON ELECTRICITY NOT GAS! You're saving the environment! (But you could do that in a Prius, Fit, or any other subcompact.) The Model S and the Roadster are electric cars. They accelerate faster than a Lamborghini Countach, look totally badass, and, oh, by t

I can't disagree with anything you said. The Leaf is a good little second or third car. I use mine as my daily commuter, usually 15-40 miles a day, and we use it for most of our driving on weekends. It easily gets used for >50% of the miles in the house. But the range just doesn't cut it for about 10% of the trips. It is actually rather fun to drive, but only once you get good at ignoring all the whirly gigs warning you about how much energy you are wasting and the completely bogus range estimator.

If they can get the real range up to 150 or 200 miles it will be vastly easier to own a car like the Leaf as your only car.

This. I commute several days a week nearly 40mi each way. While that is technically within the capabilities of the Leaf, and I do have a charging station at work... the problem comes with the fact that a) if the range drops off from the reasonable estimate (i.e., I drive much faster than 55mph or the car loses range with age) or b) if I don't get a charging spot at my work parking lot, then I'm at risk of being stranded on the highway.

Right now I drive a 10 year old Prius, which does OK for mileage (50mp

But for $50k you can get a 356, 912, 914, VW Bug or Bus - anything that takes a 200mm clutch, and convert it to battery power from a few different vendors, and still have money left over (maybe, depending on which car you are using as your host).

It's be nicer if it didn't look like it was styled after a 1970s movie prop. It's one of the biggest problems with most electric cars (and many hybrids) - they look like someone from Disney's Imagineering division was tasked with designing a style that would fit into the World of Tomorrow. Why can't they just look like a car? (and before you claim aerodynamics, the same argument can be made for an ICE car and yet nobody worries about those last few percent on those)

My local dealers in Georgia do not carry electric cars. To get an electric car you have to order it through them (if their manufacturer actually makes one) or buy online. In other words, car dealers are hurting electric car sales.

I hope Tesla is successful. Car dealerships are an anachronism and offer no value to the consumer. They are just needless friction in the car market and just adds expense and bullshit for us consumers.

Yeah, because aside from the uberdollar Tesla Model S there really isn't anything out there that is significantly different then there was 4 years ago. All the EVs are still in this 80-90 mile range unless you got the bucks to buy the Tesla. In a couple years this is going to open up more. Nissan is planning a higher range Leaf and Tesla has some stuff out there for a lower priced EV with (speculated) good range.I want an EV but I can't do the 90 mile thing. I have a single trip I take about once a

I certainly hope that Nissan will release the sport version of the Leaf they built... The Leaf Nismo RC [nissanusa.com]. Looks so much better, and they relocated the drive system to the back wheels, where $DEITY intended. Put a reasonable interior and battery in it, offer it for $30ish... I think there's a market for it.

Well, if your current ICE does last 3-4 years like you hope, maybe you'll be able to replace it with a Tesla Model 3. 200 miles of range, base price of $35k, expected release in the 2017-2018 time frame.

I'm actually in a similar situation - my car is showing signs of age, and while it is running fine now, I can't be sure how much longer it will. Most of my daily driving is under 30 miles, so a Nissan Leaf would do the majority of the time, however once a month I take a trip that is about 100 miles round

Nope, in 1999 both houses of the Georgia legislature and the governor's mansion were controlled by Democrats. You can look it up [wikipedia.org]

In 1998, Barnes ran for governor again, this time defeating Secretary of State Lewis A. Massey to win the Democratic primary.[9] Running on the themes of education reform and health care reform,[5] he defeated Republican businessman Guy Millner in the general election with a victory of 53% to 44% to become the 80th Governor of Georgia.[2][10]

The Democrats retained control of both houses of the legislature[11] and retained all but two state level offices

Isn't Georgia one of those states where a majority of the folks rail against government intrusion and regulations into the private sector?

Must be nice to talk out of both sides of your mouth. Maybe they should get a gig as a sideshow freak.

I know very close to nothing about Georgia or the politics involved, but going by what you just wrote:

(1) Georgia is one of those states where a majority of the folks rail against government intrusion and regulations into the private sector(2) In Georgia, government intrusion and regulations into the private sector happens too much

From this you conclude that the majority in Georgia are talking out of both sides of their mouths? Wouldn't it make sense to say that they're right and, if anything, should be rai

"...as reported by the L.A. Times, is that recent electric car sales in the U.S. have been stagnant"

from the LA Times:

"Sales of electric drive vehicles are stuck at about 3.6% of all new car sales for 2014"

"And that's during an otherwise robust sales season. Total figures for August were higher than any time in the last decade."

So the absolute number of electric car sales is increasing but their market share is not. The reporter, one "Charles Fleming," seems not to comprehend that a fixed percentage of an increasing value is itself an increasing value. "Stagnant," is the wrong term to describe an increase in sales. Math is hard.

(From TFA): "Musk and Tesla's biggest hurdle in the U.S. has been bypassing conventional dealerships and selling directly to customers. "

I don't get why Tesla's biggest hurdle to sales is bypassing conventional dealerships. It seems like their biggest hurdle would be to convince people to purchase a new type of vehicle that had different advantages and disadvantages than anything they had owned before. The linked article on the slowing sales of electric vehicles also refers to that when it mentions tha

Because:
1) Dealers sell more than one brand. They will steer the buyers towards other brands if the buyer is hesitant about Tesla. Dealers don't care about one brand loyalty - just want to sell as many as possible in a month.
2) Dealers will definitely try to sell more gas cars as they break down more frequently and the $$$ for dealers is the service dept. They barely make a profit in the sales dept.
3) Tesla has a specific idea on how to do customer experience. Dealers are the worst in this category. Tesla wants to avoid this.

I could be wrong, but I doubt the Tesla strategy is quite what you've stated?

At best, it might be ONE factor supporting the strategy. But I think the *primary* motivation of doing their own sales and bypassing dealerships is simply cutting out the red tape and middle-men.

The fact the dealers sell more than one brand seems pretty irrelevant in the grand scheme of things to me? First of all, most dealers have used cars lots that carry whatever they get in trade to resell. That will include Tesla vehicles in

2) Dealers will definitely try to sell more gas cars as they break down more frequently

Well, technically the perception is the opposite, that electrical cars are not proven on the road yet. That is why Tesla is required to give out free lengthy warranty support, since they want to gain the trust of their initial customers.

And that's probably why, as you've already said, and which I completely agree with, that dealers are not going to make money for providing over-priced maintenance & repair services (since Tesla is going to be the one mostly footing the bill).

All gas-engine cars are quite similar, and thus the same mechanic can work on most of them without much trouble

Parts are not interchangeable, and the more brands you service the wider your parts inventory has to be. Sure they all order in for the major stuff, but at least the most common regular consumables have to be on hand.

And experience is very vehicle specific. If you know how to change a clutch in a VW Jetta that doesn't mean you know how to change a clutch in an Ford Taurus.

I don't get why Tesla's biggest hurdle to sales is bypassing conventional dealerships. It seems like their biggest hurdle would be to convince people to purchase a new type of vehicle

That would be difficult, but an EV is not a new type of vehicle. It's at least as old as the ICE-powered car.

that had different advantages and disadvantages than anything they had owned before.

But see, that's the point of Tesla. People have been clamoring for a vehicle which has those specific advantages, and they don't care about the disadvantages. There's plenty of people for whom the range is simply not an issue. If they need to go farther, they'll have their driver take them in their A8L or long S-Class, or they'll take a black car service or limo service — perhaps to an airport.

But see, that's the point of Tesla. People have been clamoring for a vehicle which has those specific advantages, and they don't care about the disadvantages. There's plenty of people for whom the range is simply not an issue. If they need to go farther, they'll have their driver take them in their A8L or long S-Class, or they'll take a black car service or limo service — perhaps to an airport. I mean, we are talking about people who can afford to dash off $70k+ for a car that is not all things to all people. These people are far from broke and they can probably write all of this off, anyhow.

Poor guy bought a BMW electric car and was informed by the dealer that he can use any charging stations he saw on his phone app. The dealer didn't educate the purchaser about charging stations appropriately and the guy didn't have a proper charging port in his garage. The guy bought the car because he listened to what the dealer said and didn't do much independent research.

It is hard to build your brand image when a bunch of lying greedy a-holes are your main contacts to the public. Dealers are going to take a ~10-15% cut as well, which makes an already expensive alternative that much worse. For a new brand to jump directly to the dealer model is a huge hurdle.

The real question is when the other brands are going to make the plunge as well. If Tesla manages to get their model to stick well enough in a bunch of states you can bet that at some point an automaker that is alrea

If I were a state I would remember that Tesla played one state against another until one desperate state gave them a reported $500 million dollars. If I were a resident of a state, I would ask why a profitable company wants to much more aggressive in emptying the public purse other companies.

I had some sympathy for Tesla and their fights with states even if I though that they should invest in states first to show some good will. Now they just seem like another evil company trying to make money by empty

And how much of that stagnancy is because of a lack of options to choose from? I mean, really when you look at it there are VERY few models available as full EV - Tesla, and then a couple little entry levels that have been given EV versions... There's almost nothing available in between, and absolutely nothing in the small/mid SUV or mid-sized sedan or sport coupe markets to choose from.

Until there are more models to choose from that span all the market segments, there's always going to be a limited subset

Tesla *has* publicly commented on how many vehicles it has sold in Georgia, it says that the 150 maximum is for a calendar year, while the 173 figure is for October to June and it hasn't hit the 150 mark for 2014.

sterling allies of the separate but equal doctrine and creation science, Georgias firm stance against competition from Tesla shouldnt surprise anyone. Texas and Ohio do the same thing when it comes to selling cars in the interest of preserving a relic of a dying baby boomer era. We all know and love the car salesman for his even handed approach, calm demure, and truthful nature right?

another issue of stagnation is price. Outside of California and New York, electric cars largely dont have subsidies. this is partly due to the franchise racket, and partly because other states dont have stringent EPA mandates or emissions standards like california. Tesla is also, according to their website a 'premium' electric vehicle company. The average price for a Model S is around $90,000 US so among the worst wealth gap in history, the remenence of a major housing crisis, a looming student debt crisis, and rampant american unemployment its no wonder most people arent exactly leaping at the opportunity to saddle themselves with this. 90k is, or was, a decent chunk of a home for most people before the collapse.
target demographics are also not to be forgotten. Millenials like myself do not care for cars. give us light rail, busses, and trains but ultimately the thing that matters most to us is not that symbol by which our parents projected their status. cars are expensive to maintain and own for us because we earn less than our parents do and, once again, are commonly saddled with an enormous amount of student debt. make it as futuristic as you want, thats fine, but that centre console only does half the things our smartphones are capable of, and requires us to multitask and drive while using it.

I don't know why you're calling big cities with lots of jobs and cultural opportunities "hellholes." You have the choice to live in the suburbs or a smaller city, and clearly that's the one that makes sense for you. But why do you tell one person how limited their worldview while yourself attacking people different from you?

Tesla had a 2 month backlog (time from order to delivery of a car) of 2 months early this year. In the spring it grew to 3 months. Early summer they upped production to address this, but backlog grew to 4 months. Tesla is building more cars than ever, yet the wait keeps increasing.

"Stagnant" my ass.

All this for a car that was introduced almost 2 years ago and has had virtually no updates during this time. Shows how far ahead of other manufacturers they were.